The heterogeneous impacts of business cycles on educational attainment

What is it about?

This study examines how differences in the unemployment rate before high school graduation change life-time educational attainment. Using data from the United States' 1979 National Longitudinal Survey of Youth, this analysis identifies individuals who are on the boundary between pursuing and not pursuing additional education at age 17. Exposure to a higher unemployment rate at age 17 is associated with higher educational attainment for men in the 60–80th quintile of their cohort's ability distribution. There is no evidence of an effect at on other points on the ability distribution.

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Why is it important?

The decision to pursue additional education after high school is one of the most important decisions an individual can make. This decision is based on numerous factors, but among those factors is the labor market they face after high school. In this paper, the empirical evidence shows the importance of distinguishing individuals who are likely to be impacted by poor labor market opportunities and those who are not. Looking at cohorts by ability reveals important differences across the ability distribution. Only mid to above average ability individuals are influenced by fluctuations in the unemployment rate at age 17.

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